In September 2011, FOMIN presented a project to the donors committee that aimed to test a novel approach to evaluate the credit worthiness of micro and small entrepreneurs. It was a tool developed by the Entrepreneurial Finance Lab, a for-profit organization created in 2010 after developing a low-cost credit screening prototype at the Harvard Center for International Development.

According to the World Bank’s Enterprise Surveys, about 10.5% of formal firms in Latin America have been in operation for 5 years or less. This is bad news for innovation and growth in the region. In a typical year in the US, startups—or businesses that are just beginning to operate—account for about 10% of firms (in a typical year, 35% of firms have been in operation for 5 years or less). These numbers are important because from this pool of young firms spring those that drive job creation, output, and innovation. Although we know very little about firm dynamics in Latin America, we can draw some conclusions by looking at what we know about firms in the US: